CMA updates scope of concerns in rail signalling merger

In June, the Competition and Markets Authority (CMA) published its Phase 2 provisional findings which set out that Hitachi’s €1.7 billion proposed acquisition of the Thales’ Ground Transportation (GTS) business raised competition concerns in relation to both digital mainline and urban signalling rail systems. The publication of the provisional findings initiated a period of consultation in which the CMA invited responses to the findings from interested parties and continued to gather further evidence.

Having carefully considered the new evidence, together with the wide range of information gathered previously, the independent CMA Inquiry Group has updated its initial findings and reached the provisional conclusion that the merger would not result in a substantial lessening of competition (SLC) in the supply of Communications Based Train Control (CBTC) signalling systems in the UK. Today’s update does not change the CMA’s provisional assessment that the merger is likely to lead to an SLC regarding the supply of digital mainline signalling.

Transport for London (TfL), which oversees London Underground, is the main customer for CBTC signalling systems in the UK and its current suppliers are Thales and Siemens. Hitachi has not previously supplied signalling systems to the London Underground. The CMA’s assessment focused on the likely competition to resignal the Bakerloo and Piccadilly Lines, two of the main lines on the London Underground. In its original provisional findings, the Inquiry Group had considered evidence which indicated that Hitachi was one of a limited number of suppliers with the capabilities to challenge Thales and Siemens in these future tenders. The Inquiry Group provisionally found that the merger would therefore result in a substantial lessening of competition in this market.

The new evidence obtained by the CMA, following the responses to the provisional findings, now supports the provisional conclusion that Hitachi would not be a credible bidder to supply CBTC signalling systems to the London Underground in the near to medium term.

Resignalling lines on the London Underground is regarded as being particularly complex and challenging compared to most other metro systems. TfL attaches particular importance to proven experience and capabilities when appointing signalling suppliers. Most of Hitachi’s relevant CBTC projects have yet to be completed and are smaller and less complex than the upcoming Piccadilly and Bakerloo line projects. Therefore, given the likely time frame of the tendering process, Hitachi is unlikely to demonstrate the ability to meet TfL’s requirements for the Piccadilly and Bakerloo line projects.

Having tested this new evidence thoroughly, the CMA has updated its provisional findings and now considers that Hitachi will not be a significant competitor to Thales in relation to future CBTC projects in the London Underground, and that the merger is unlikely to result in an SLC in the supply of CBTC signalling systems in the UK.

Stuart McIntosh, chair of the independent Inquiry Group, said:

Effective competition in the urban and digital mainline signalling markets is essential for ensuring the UK’s rail transport systems are efficient and reliable for passengers who rely on these services.

Having reviewed the additional evidence, which indicates that Hitachi is unlikely to be a credible bidder for signalling projects on the London Underground in the foreseeable future, we have provisionally concluded that the merger would not harm competition in the supply of these systems in the UK.

That said, our provisional view that this merger raises concerns in the supply of digital mainline signalling in Great Britain, is not affected by today’s announcement.

The CMA’s investigation continues, and it remains due to issue its final report by 6 October 2023. For more information, visit the Hitachi / Thales case page.

Note to editors:

1. Hitachi Rail Ltd (Hitachi) and Thales SA’s Ground Transportation business (Thales) are two of the leading global suppliers of signalling systems for mainline and urban railway networks (alongside Siemens and Alstom).
2. Digital Communications Based Train Control (CBTC) signalling is the most common signalling technology used for urban metros such as the London Underground.
3. Both Hitachi and Thales are active in urban signalling in the UK and worldwide, with Hitachi installing a system on the Glasgow Subway and Thales installing various systems on the London Underground.
4. In relation to mainline signalling, the Inquiry Group provisionally considers that should the merger go ahead, there would be fewer credible bidders remaining for digital mainline signalling tenders, which could raise costs for Network Rail and negatively impact the digitalisation of the UK’s rail network. More details can be found in our June press release.
5. There is now a one-week consultation period on the addendum to the provisional findings, during which time anyone may make submissions to the CMA. Submissions should be made to Hitachi.Thales@cma.gov.uk and received by 31 August 2023.